As we all have heard by now, Greece is going through a massive IMF and European Union bailout and is being forced to make huge public sector cuts and suspension of labour protections in order to receive the money. Huge protests have been taking place, and another general strike has been called for this week. This bailout and unrest is a major issue for the G20, as it is a bit of a kink in the G20’s pronouncements of economic recovery. It is also a test case for how the global economic powers in the G20 will be responding to further crises. The G20 is nervous about Greece hampering the global recovery, and has been key in encouraging the IMF and EU on the bailout and the bailout conditions.
There is a rather patronizing sense that Greece (and other so-called PIGS countries – Portugal, Ireland, Greece and Spain) are notorious over-spenders and have to be reigned in. There is a major deflection of blame towards ‘bloat’ and away from financial markets, bubbles, etc… that are truly to blame. The public deficit in Greece is no higher than that in the U.S. or the UK, yet they are the ridiculed who have to take the medicine of the IMF. They obviously don’t have the clout that the U.S. or UK have to deal with things internally, such as through the massive taxpayer bailouts of banks in 2008.
There is a strong argument that this is really all about is an ideological war on the public sector as a means to deal with economic crises, rather than getting private financial interests to pay for it. Greece is just the most acute and in the news, with Canada and others looking to dole out the same medicine.
Prof. Ingo Schmidt of Athabasca University sums it up well:
“The economic problem is still the same: throwing uncovered public cheques toward preserving overaccumulated private wealth. In order to overcome the continuing world financial crisis, this overaccumulated wealth needs to be written off. The dominant opinion in ruling financial and industrial circles, however, has been to avoid the economic and political fallout from a deepening of the crisis that such a write-off would bring. At least so far…
…Instead, the strategy has been to blow up public deficit bubbles like the economic authorities blew up internet-, housing-, and resource-bubbles in the past. The difference is that the private sector bubbles of the past that led to the financial crisis could always rely on public sector bailouts. Now the bubble and the bailout are both expected to come from the same public purse. The neoliberal solution being called for by the Germans, the Greek government, the EU and the G20 is now to demand a ‘long war’ on the public sector.”
According to Schmidt, finance is king in all this. What the financial players want is the opportunity for “making money from speculation against Greek government bonds and securing previous investments by forcing whatever coalition of EU-governments and international organizations to funnel credit through Greek coffers into their private hands.”
I have put together a compendium of articles on the Greek crisis. It will continue to be updated as more events unfold.